Every year at about this time, companies begin to plan for the next year. In doing so, they reflect on what was successful in the current year and what are their goals for the next year. Many companies have elaborate procedures surrounding their planning process. They often include multiple levels of the organization. And then, successful companies track their performance to their plan annually while others stick it in a drawer and blow off the dust when the next planning season arrives.
And while most of us witness the corporate planning process each year, we may not be as diligent about our own financial planning. In a recent study, Defining Financial Planning, Spectrem found that approximately a third of investors have no financial plan. And sometimes, even those who have a plan fail to update it on a regular basis.
The largest percentage of investors (41%) who have not created a financial plan in conjunction with a financial provider indicate the reason they have not worked with a provider to create a plan is because they can do it themselves. In fact, about a quarter of investors without a plan believe they can do a better job of planning than a professional advisor. Other reasons for not having a plan include “too much cost” at 19% and 31% of investors who “just haven’t gotten around to it”.
Targeting those investors who just think they are smarter than you probably isn’t worth your time. However, those who just haven’t gotten around to it provide a great opportunity. The research suggests that investors are much more loyal to a firm once a plan is in place and they are more likely to move additional assets to that firm.
What can you do to convince investors it’s time to set up a plan?
- Explain that the time and commitment needed from them is not laborious. Investors generally indicated it took them 1-3 hours to gather the necessary information.
- Help them to identify their financial goals. Explain how the plan will help them track whether they can achieve their objectives but if life changes, plans are flexible.
- Be aware of key life events. Often, events such as the death of an elderly parent lead to a windfall of money (36%) and can spur an investor to create a financial plan. Other life events include retirement (30%) or employment changes. Touch base with existing clients who don’t have a plan upon these events or reach out to prospects should you become aware of these events.
Planning is a good idea and the research indicates that most people with a plan tend to follow it.
Financial planning as part of the advisory process is here to stay. It’s time to reach out to clients without a plan and convince them of the benefits. Research shows that it will be good for both of you.